A first look at the Medicare CY 2023 OPPS and ASC proposed rule

The Centers for Medicare and Medicaid Services (CMS) promises to incorporate the US Supreme Court's decision on the 340B program in the final rule, assuring the full reimbursement rate for providers who qualify for the 340B program. The proposed rule does not incorporate those changes and causes some discord among the have and have-nots in the hospital industry.

CMS has released its annual proposed rulemaking with payment and policy changes to the Medicare Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) payment rates for calendar year (CY) 2023 (collectively, the OPPS proposed rule). Included in the OPPS proposed rule are updates and refinements on payment for drugs acquired through the 340B program, continued focus on disclosures of mergers and consolidations in the hospital and nursing home industry, reinforcement of post-public health emergency telehealth behavioral health services, and recognition of rural emergency hospital needs, among others. In furtherance of the Biden administration's priorities to advance health equity in rural areas, CMS proposes to establish payment, enrollment and ownership rules for Rural Emergency Hospitals and to create a specific exception to the Stark Law.

Providers should carefully evaluate the far-reaching proposals set forth in the OPPS proposed rule and consider submitting comments to ensure their voices are heard as CMS contemplates making these proposals final. CMS will accept comments through September 13, 2022. 

Key highlights outlined in the OPPS proposed rule include the following:

OPPS payment for drugs acquired through the 340B program

The OPPS proposed rule describes an open disconnect in the tables that are published as part of the rule and preamble and explains that CMS could not make the necessary changes to the 340B payment rates in time for publication due to the US Supreme Court's June 15, 2022 decision which held that CMS could not vary payment for drugs and biologicals among groups of hospitals without first conducting a survey of hospital acquisition costs.

CMS writes, "given the timing of the Supreme Court's decision, we were unable to adjust the proposed payment rates and budget neutrality calculations to account for that decision before issuing this proposed rule. For CY 2023, we are formally proposing a payment rate of ASP minus 22.5 percent for drugs and biologicals acquired through the 340B Program, consistent with our prior policy. But, we fully anticipate applying a rate of ASP plus six percent to such drugs and biologicals in the final rule for CY 2023."

Thus, a number of hospitals stand to benefit from the US Supreme Court's decision and are looking to rapidly obtain the missed payments that were held in abeyance during the litigation. But, the need to maintain budget neutrality also necessitates that CMS must apply a reduction in the OPPS conversion factor of US$1.96bn. Unfortunately, this sets the stage for inter-hospital wrangling over payments that threatens to split the hospital advocacy community.

Rural Emergency Hospitals

The Consolidated Appropriations Act, 2021 (CAA) established the Rural Emergency Hospital (REH) designation as a new Medicare provider type. REHs are facilities that convert from either a critical access hospital (CAH) or a rural hospital with less than 50 beds, and that do not provide acute care inpatient services with the exception of skilled nursing facility services furnished in a distinct part unit. By statute, REH services include emergency department services and observation care and may include other outpatient medical and health services as specified by CMS.

Payment for REH services

Covered outpatient department services provided by REHs will receive an additional five percent payment for each service beginning January 1, 2023. CMS proposes to broadly consider all covered outpatient department services (that is, services that would otherwise be paid under the OPPS) as REH services. Outpatient services not otherwise paid under the OPPS would be paid under the applicable fee schedule for such services and would not receive the five percent payment increase applied to REH services, according to CMS. REHs would also receive a monthly facility payment. After the initial payment is established in CY 2023, the payment amount will increase in subsequent years by the hospital market basket percentage increase.

Provider enrollment

Notably, the OPPS proposed rule provides that facilities converting to an REH may submit a Form CMS 855A change of information application instead of an initial enrollment application.

Application of the physician self-referral law

CMS proposes a new exception for ownership or investment interests in an REH and revisions to certain existing exceptions to make them applicable to compensation arrangements to which an REH is a party.

Conditions of participation

In June 30, 2022, CMS proposed conditions of participation (CoPs) that REHs must meet to participate in the Medicare and Medicaid programs and the agency is seeking input from the rural community on specific proposed REH standards. The deadline for commenting on the CoP proposed rule is August 29, 2022.

Rural Sole Community Hospital (SCH) exemption - site neutral clinic visits

In an effort to ensure that rural providers are paid for clinic visit services at off-campus provider-based departments (PBDs) "at rates comparable to those paid by on-campus departments," CMS proposes to exempt rural SCHs from the site-specific Medicare Physician Fee Schedule-equivalent payment (which is approximately 60 percent less than the OPPS payment rate) and to pay for clinic visits furnished in excepted off-campus PBDs at the full OPPS rate. The agency is also requesting comments on whether it would be appropriate to exempt other rural hospitals, such as those with fewer than 100 beds, from the site-neutral payment policy.

RFI on provider mergers, acquisitions, consolidations and CHOWs

In response to President Biden's Executive Order calling for a "whole-of-government approach" to address "overconcentration, monopolization, and unfair competition in the American economy," CMS released data files to the public on hospital and skilled nursing facility mergers, acquisitions, consolidations, and changes in ownership (CHOWs) going back to 2016, which the agency expects to update on a quarterly basis. In a request for information (RFI), the agency seeks comment on how CMS data "could be used to promote competition across the healthcare system or protect the public from the harmful effects of consolidation within healthcare." CMS seeks further comment on whether additional data should be released and whether there are additional provider types where information on mergers and acquisitions may be helpful to the transparency efforts. Given the increased activity regarding consolidations and increased scrutiny of healthcare industry transactions, this RFI should generate significant response and discussion.

Behavioral health services furnished remotely to beneficiaries in their homes

In an effort to continue the advances made during the Public Health Emergency (PHE) and to recognize the need for health equity, CMS proposes to designate behavioral health services furnished remotely by HOPD staff "using communications technology to beneficiaries in their homes" as covered outpatient services for CY 2023 and to create specific coding for these services. CMS would require an in-person visit within six months prior to initiating remote services and then every 12 months thereafter, with some exceptions. More frequent visits would also be allowed "as driven by clinical needs on a case-by-case-basis." CMS also proposes that audio-only telecommunications may be used to furnish these services in instances where the beneficiary is not capable of, or does not consent to, the use of two-way, audio/video technology. These requirements would not apply until 152 days after the PHE for COVID-19 ends.

Updates to the OPPS and ASC payment rates

CMS proposes to update the OPPS and ASC payment rates for facilities that meet quality reporting requirements by 2.7 percent. This represents a hospital market basket increase of 3.1 percent minus a productivity adjustment of 0.4 percentage points. Concerned that CY 2020 cost report data may be "too influenced" by the PHE, CMS says it will set the CY 2023 OPPS and ASC payment system rates using CY 2021 claims data with cost report data through CY 2019.

Payment adjustments for domestic N95 respirators

Recognizing that hospitals "may incur additional costs when purchasing domestic NIOSH-approved surgical N95 respirators," CMS proposes a payment adjustment under the inpatient prospective payment system (IPPS) and OPPS "that would reflect and offset, the additional marginal resource costs that hospitals face in procuring domestically made NIOSH-approved surgical N95 respirators" for cost reporting periods beginning on or after January 1, 2023. This adjustment would be paid "biweekly as interim lump-sum payments" and reconciled in the cost report. These surgical respirators, which faced severe shortages at the onset of the COVID-19 pandemic, are essential for the protection of beneficiaries and hospital personnel that interface with patients.

Updates to the Inpatient Only (IPO) list

The IPO list identifies services for which Medicare will only make payment when they are furnished in the inpatient hospital setting due to the invasive nature of the procedure, the underlying physical condition of the patient, or the need for at least 24 hours of postoperative recovery and/or monitoring time. In the CY 2021 OPPS final rule, CMS eliminated the IPO list over three years and removed 298 codes from the list beginning in CY 2021. CMS then halted the elimination of the IPO list in the CY 2022 OPPS final rule (based on a clinical review by its internal physicians) and returned most services removed from the IPO list in CY 2021 back to the IPO list beginning in CY 2022. CMS proposes to remove 10 services and add eight services to the IPO list for CY 2023 as detailed in Table 46 of the OPPS proposed rule.

Supervision by nonphysician practitioners of select diagnostic services

CMS proposes to revise 42 CFR 410.28(e) to clarify that certain nonphysician practitioners (nurse practitioners, physician assistants, clinical nurse specialists and certified nurse midwives) may supervise the performance of diagnostic tests to the extent they are authorized to do so under their scope of practice and applicable state law.

For more information on the OPPS proposed rule, please contact the Norton Rose Fulbright professional(s) listed below.

Special thanks to Senior Health Care Analyst Kathleen P. Rubinstein (Houston) for her assistance in the preparation of this content.